What: Madrid sees surge in office-to-residential conversions as developers capitaliSe on price differentials, with luxury residential space commanding nearly double the value of prime office space

Why it is important: This trend reflects a fundamental shift in urban property dynamics, where changing work patterns and luxury residential demand are reshaping retail districts in major cities.

Madrid is experiencing a significant transformation in its prime urban areas as office buildings are increasingly being converted into luxury residential properties. This trend, which began with Arcano's acquisition of EFE's historic headquarters in 2019, has gained momentum with over a dozen buildings now undergoing conversion in prestigious neighborhoods like Salamanca, Chamberí, and Justicia. The economic rationale is compelling, with luxury residential space commanding up to €20,000 per square meter compared to €10-12,000 for prime office space. While the most apocalyptic predictions about office space obsolescence haven't materialised, the trend reflects evolving tenant preferences for higher-quality spaces in prime locations. Major projects like María de Molina 50, acquired for €205 million by Grupo Lar and BlackRock, demonstrate the scale of this transformation, with plans for 158 luxury residential units and a 400-place student residence. This shift represents not just a change in property use but a broader evolution in Madrid's urban landscape.

IADS Notes: Recent market developments reveal a global trend in the transformation of commercial properties, particularly in prime urban locations. According to The Robin Report in March 2025 , major retailers are strategically reevaluating their real estate portfolios, with property values often exceeding operational retail value, leading to innovative mixed-use conversions. This trend is exemplified by Retail Gazette's April 2024 report  on the Fenwick department store transformation in London, where a £430 million investment is reducing retail space from 132,310 to 50,504 square feet while significantly increasing office space, demonstrating the economic drivers behind such conversions. Silive.com's March 2024 coverage  of the Monmouth Mall transformation in New Jersey shows how this trend extends beyond traditional retail locations, with the addition of 1,000 luxury apartments to existing retail space. The pattern is further reinforced by Fashion Network's February 2024 report  on the House of Fraser's £132 million Oxford Street revamp, where mixed-use development is seen as key to urban retail property revival. These developments parallel Madrid's office-to-residential conversions, where the potential to achieve €20,000 per square meter for residential space versus €10-12,000 for offices is driving similar transformations, suggesting a fundamental shift in how prime urban retail properties are being reimagined for modern use.

Luxury flats are eating up office space in Madrid